Tata Steel, Tata Power & Tata Consumer Products are among Tata group companies, which have come out with their December quarter results of late. While Tata Power and Tata Consumer Products (TCPL) reported strong set of numbers, Tata Steel logged a surprise loss for the quarter. Analysts are largely positive on Tata Power and TCPL while they are positive-to-neutral on Tata Steel.
Tata Steel
Tata Steel’s December quarter results surprised many, as the steelmaker reported net loss of Rs 2,502 crore for the December quarter compared with a net profit of Rs 9,598 crore in the year-ago period. The company’s revenue from operations fell 6 per cent to Rs 57,084 crore from Rs 60,783 crore in the same quarter last year. Losses came mainly due to higher deferred tax on account of the British Steel Pension Scheme, JM Financial said.
The brokerage said Tata steel’s reported consolidated Ebitda was lower than its estimates. India business reported a sequential increase in earnings (Rs 10,400/tonne) led by a decline in raw material costs, it said while adding that Europe witnessed a sequential dip in earnings (minus $95/tonne) on account of lower realisations despite elevated costs.
“The company is progressing well on its 5 mpta Kalinganagar expansion and is ramping up NINL to its rated capacity of 1 mpta. Tata steel expects to increase capacity to 40 million tonnes by FY30, with immediate focus on Kalinganagar and NINL. Tata Steel remains the preferred name in the ferrous space,” it said while suggesting a target of Rs 135 on the stock.
Elara Securities has a target of Rs 132 on the stock. Motilal Oswal has a ‘neutral’ rating on the stock. It has lowered its target price for the scrip to Rs 115 from Rs 123 earlier.
Tata Power
Tata Power reported a 91 per cent jump in consolidated net profit at Rs 1,052.14 crore compared with Rs 551.89 crore in the same quarter last year. Revenue rose 30 per cent to Rs 14,339 crore for the quarter compared with Rs 11,015 crore in the corresponding quarter last year. Ebitda rose 53 per cent YoY to Rs 2,818 crore, led by capacity addition in renewables and better performance across all businesses.
BofA Securities noted that Tata Power’s Q3 earnings more than doubled YoY on higher profits from JVs and CERC tariff order for Mundra plant for complete pass through of imported coal price. Revenue, it noted was, up 22 per cent YoY, beating its estimates by 2.4 per cent on high generation as power demand remained strong.
“We continue to see Tata Power as a key beneficiary of India’s renewable energy push and expect valuations to sustain on the back of higher JV profits on elevated coal prices; likely re-imposition of Sec 11 order & c) tight power situation in the country. We tweak our FY24/25 EPS upwards by 2 per cent/5 per cent and revise our target price to Rs 271 against Rs 265 earlier),” it said.
Nuvama said all businesses performed broadly in line except the solar EPC business, which was impacted by slower execution in the wake of high prices of wafers, polysilicon, cells and modules.
“TPCL is likely to receive Rs 2,000 crore from RE monetisation soon, providing equity support that should help it accelerate RE manufacturing and generation business. EPC margin is the key variable to keep an eye out for. This coupled with the stock’s rich valuation forces our hand to maintain ‘HOLD/SN’ with a target of Rs 217,” Nuvama said. This is against Rs 250 target that Nuvama had assigned to Tata Power earlier.
ICICI Securities has a target of Rs 262 on the stock. DAM Capital sees the stock at Rs 261.
Tata Consumer Products
Tata Consumer Products (TCPL) reported a 25.63 per cent increase in consolidated net profit at Rs 364.43 crore for the December quarter compared with Rs 290.07 crore in the year-ago quarter, led by growth from the domestic food business.
Nomura India has cut its FY23-25 EPS estimates by 6-14 per cent to factor-in the headwinds in International operations. It expects headwinds in Tea business to moderate and said salt business demonstrated gravity-defying resilience. International business, it said, nullifies India business positives, but is on an improving track. Nomura India finds the stock worth Rs 880.
PhillipCapital said TCPL saw consolidated revenue growth of 8.3 per cent YoY, which was marginally ahead of its estimates due to strong performance in Food (up 29 per cent YoY) and non-brand portfolio (up 25 per cent). It noted that the company management recent decision of adopting split route of distribution for beverages and foods business will help to improve assortment in all towns having population of more than 1 million. The brokerage cited the company’s foray into highly unorganised and fast-growing multiple categories.
The brokerage said the near term margin could be under pressure in international business due to currency devaluation, hyperinflation and lag in terms of taking price hikes. At the same time, it said, volume growth remains a challenge in tea (increased competitive intensity) and salt.
“We maintain BUY with target price of Rs 860 (50 times FY25 EPS), as its operating margin should rise as the troika of price hikes, premiumisation and cost efficiencies program, should negate the adverse impact of higher RM to a large extent,” PhillipCapital said.
JM Financial finds this stock worth Rs 830.
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